What Devalues a Home and What Can You Do to Prevent This?

Written by: Adiel Gorel

Home Devaluation – Why, When, Where & How Some of my investors want to know, what devalues a home and is there anything that they can do or not do to prevent this? What is it that causes the value of a home to go down at times and what does this mean for real […]

Published on May 3, 2023

Last update: 3 months ago

Est. Reading: 3 minutes

Home Devaluation – Why, When, Where & How

Some of my investors want to know, what devalues a home and is there anything that they can do or not do to prevent this? What is it that causes the value of a home to go down at times and what does this mean for real estate investors? Given current inflation rates and the depression in some global markets, there is some significant anxiety surrounding the possibility of house devaluation right now. Hence this is something that we will be looking at closely in our upcoming property expo. You can sign up for this free online event here.

There are things that can devalue property, natural events that are cyclical in nature. These should not worry the long-term investor. – Adiel Gorel

What devalues a home?

In the decades that I have spent in the real estate investing space, I have seen a lot of ups and downs. If I have seen the economy nosedive, I have also seen it revive and resurrect itself. This is a cyclical process that we also see being acted out at this time. For instance, property prices went up quite a bit during the pandemic since there were supply chain issues, labor problems, mobility limitations, and so on. This was a time when there was demand and supply could not keep up with this.

However, property prices once again fell when interest rates went up. The point is that these are natural cycles of the economy and not something that investors have to watch out for. There is not a lot that investors can do here, nor should they be looking to. Assuming that you’ve invested in the right kind of market, this devaluation is an issue that will resolve itself.

How to deal with house devaluation.

If you are a real estate investor or plan to invest in real estate, you have to get into this with a long-term mindset. Buy, rent out, and then do nothing. Doing nothing is actually just the solution when property prices go down. Doing nothing, just waiting it out is the wisest thing that an investor can do. Since this whole thing is cyclical, what goes down must also come up. Property prices may fall but they will rally once again as well. Local perturbations of the values aren’t a matter of any concern here.

The thing to remember is that real estate prices will typically keep up with inflation. In fact, they not only keep up with inflation but actually rise at about one and a half times the rate of inflation. So, over the long term, your property has not actually devalued at all, even though property prices did fall in the interim.

This is why I say that investors need not worry about what devalues a home. It is their job to invest and then do nothing. Tune in to my podcast to know more.

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